Pound to Euro Exchange Rate Advances as Investors Hesitant to Buy Euro
Markets are hesitant to keep buying a strong Euro (EUR), which is making it easier for the Pound Sterling to Euro (GBP/EUR) exchange rate to rebound today. This is despite notable weakness and concern in today’s UK job market report.
Following last week’s GBP/EUR slip from the interbank level of 1.11 to 1.10, the pair has already rebounded. Overnight, GBP/EUR picked up and has already recovered last week’s losses.
At the time of writing, GBP/EUR trends in the interbank region of 1.11, and just below its best levels since the first half of July. It marked the best level for the pair in about a month.
Today’s UK data has not really improved the Pound (GBP) outlook however. There is still more than enough room for fresh losses in Pound to Euro exchange rate going forward.
Pound (GBP) Exchange Rates Hold Ground despite Gloomy UK Job Market Report
The Pound (GBP) saw a jump against the Euro (EUR) overnight. However this was largely due to slipping market demand for the Euro, as the Pound outlook remains fairly gloomy and today’s UK job market report didn’t do much to change that.
While Britain’s key unemployment rate still remained at a surprising and deceptively low 3.9%, other factors painted a concerning picture.
No sign of a recovery yet in total hours worked in June (probably the best single measure of whether people are actually working). Does not bode well for tomorrow's GDP figures.. pic.twitter.com/W7EZ9wKzIE
— Jonathan Portes (@jdportes) August 11, 2020
What’s more, analysts believe that the key unemployment rate will rise sharply in the coming months as the government’s job support schemes unfurl. According to Yael Selfin, Chief Economist at KPMG UK:
‘As the Job Retention Scheme unwinds, we expect unemployment to rise quickly in the fourth quarter. That could see unemployment average over 6% this year compared to only 3.9% at present.’
Euro (EUR) Exchange Rates Slip from Highs amid Lack of Fresh Drive
Investors are hesitant to keep buying the already strong Euro (EUR).
The shared currency has seen months of strong performance already. It is due to confidence that the Eurozone economy was weathering the coronavirus better than other major economies.
However, amid a lack of fresh bullish surprises for the already bullish currency in recent weeks, investors have been hesitant to buy it even higher.
According to Antje Praefcke, Currency Analyst at Commerzbank:
‘The Euro does not really have that much to offer these days, either’
On top of this, there are signs that US infections are slowing while Eurozone infections show signs of increasing.
Pound to Euro (GBP/EUR) Exchange Rate Awaits Many More Key Ecostats
While today’s concerning UK job stats ultimately didn’t have much impact on the Pound to Euro (GBP/EUR) exchange rate, upcoming UK data due in the coming days could drive Sterling (GBP) lower instead.
Investors are concerned about Britain’s outlook, but it may not sink in and reflect in the Pound’s movement unless other major data disappoints as well.
Tomorrow will be another key session for UK data. Britain’s Q2 growth rate results will be published, as will trade balance and production stats.
If Britain performed better than expected in Q2, despite the coronavirus pandemic, this could support the Pound.
On the other hand though, more poor UK data could knock the British currency’s recovery attempts.
As for the Euro (EUR), it is likely to remain pressured amid a lack of fresh reasons to buy the currency higher.
Major Eurozone ecostats will be published in the coming sessions as well, but if these impress they are likely to support the Euro’s highs rather than boost it higher.
Towards the end of the week, the Pound to Euro (GBP/EUR) is likely to focus more on Eurozone growth and employment stats, as well as potential coronavirus developments.